Just to be clear - the plugin won't remove any books from the Kindle. It only works on the collections. But If you create another collection using Calibre data with the same name as the collection, then only the Calibre books will be in the collection.
In other words, you need to separate collections into Kindle managed collections, and Calibre managed collections (though a book can be in both).
If you have Collection1 on the Kindle with KindleOnlyBook1 in it, and you create a tag called Collection1 in Calibre with a few books in it, then you run the plugin, the result will be that Collection1 is replaced with the Collection1 from Calibre containing only Calibre books. So your Kindle book won't be in the collection anymore (though of course the book is still on the Kindle).
I've considered merging collections so that if a collection exists on the Kindle and has the same name in Calibre, then only the new Calibre books are added. The issue is that if you remove a book from e.g. a tag in Calibre then that book will stay in the collection on the Kindle until you manually delete. And the point of the plugin is to manage it via Calibre.
At this point it seems clearer to say there are Kindle managed collections, and Calibre managed collections and never the twain shall meet. But as always I'm open to change